SEC Names Retirement Investments Among 2017 Exam Priorities

Among the topline
priorities for the Securities and Exchange Commission’s examination staff during
2017 will be “the services provided by public pension advisers” and an “expanding
focus on senior investors and individuals investing for retirement.”

The Securities
and Exchange Commission (SEC) this week announced its Office of Compliance
Inspections and Examinations’ (OCIE) 2017 priorities.

It’s worth noting
in advance that 2017 will mark the start of a transition for the SEC—away from
eight years of oversight/appointments by a Democratic president in favor of Republican control of the executive branch, not to mention Congress.

Advisers will
likely know the SEC has five commissioners who are appointed by the president
of the United States with the advice and consent of the Senate. Their terms
last five years and are staggered so that one commissioner’s term ends on June
5 of each year. While rules are in place to ensure that the commission remains
non-partisan (generally no more than three commissioners may belong to the same
political party, for example), the president gets to designate one of the commissioners
as chairman, the SEC’s top executive holding significant sway over commission examination and enforcement activity.

Media outlets have
reported president-elect Donald Trump’s choice for the top SEC post will be Jay
Clayton, attorney and partner at Sullivan & Cromwell LLP, frequently described
in the press as one who is skeptical about the role of financial regulators
in promoting market efficiency and stability.

As it stands
today, the SEC’s areas of focus for 2017 include electronic investment advice,
money market funds, and financial exploitation of senior investors. “The
priorities also reflect a continuing focus on protecting retail investors,
including individuals investing for their retirement, and assessing market-wide
risks,” SEC suggests.

“These priorities
make clear we are continuing to focus on a wide range of issues impacting our
markets, from traditional areas such as market-wide risks to new forms of
technology including automated investment advice,” says outgoing SEC Chair Mary
Jo White. “Whether it is protecting our most vulnerable senior investors
or those investing in the trillion dollar money market fund industry, OCIE
continues its efficient and effective risk-based approach to ensure compliance
with our nation’s securities laws.”

NEXT: Honing in on SEC enforcement priorities

OCIE plans to
continue its focus on “public pension advisers” and to expand its focus on senior
investors and individuals investing for retirement.

“OCIE is broadening its ReTIRE initiative to include reviews of investment advisers and broker/dealers
that offer variable insurance products to investors with retirement accounts as
well as those advisers that offer and manage target-date funds,” SEC warns. “OCIE
also will focus more specifically on registrants’ interactions with senior
investors, including with respect to identifying financial exploitation.”

Robo-advisers
will also receive an increasing amount of scrutiny during 2017: “OCIO will
undertake examinations to review firms delivering investment advice through
electronic mechanisms, sometimes referred to as robo-advising, as well as wrap
fee programs in which investors are charged a single bundled fee for advisory
and brokerage services.”

Also of interest
to the retirement specialist market is the ongoing analysis of cybersecurity
issues, including testing of advisers’ and providers’ implementation of
best-practices to protect client data and ensure control/security of digital
assets. Further, “consistent with OCIE’s
goal of enhancing oversight of FINRA to protect investors and the integrity of
our markets, it will continue conducting inspections of FINRA's operations and
regulatory programs, and focus resources on assessing the examinations of
individual broker/dealers.”

The published
priorities for 2017 are not exhaustive and may be adjusted in light of market
conditions, industry developments, and ongoing risk assessment activities, SEC
concludes.